China doubled down on imports
China increased its imports of Iranian and Venezuelan crude in 2021, taking the most from sanctioned regimes in three years, as refiners ignored the risk of penalties in order to scoop up cheap oil. According to data from market intelligence firm Kpler, crude processors in the world’s largest importer purchased 324 million barrels from Iran and Venezuela in 2021, a 53 percent increase over the previous year. This is the most since China took 352 million barrels from the two countries in 2018.
Chinese buyers, particularly private refiners, have benefited from Washington’s tough stance on Iran and Venezuela, continuing to buy their oil long after their Asian counterparts did. A glut of unsold cargoes, rising international prices, and Beijing’s issuance of additional crude import quotas have incentivized private refiners, known as teapots, to buy more oil from pariah states. Typically, these shipments do not appear in official customs data.
This surge was triggered by rising crude prices, which made Iranian crude up to 10% cheaper when delivered into China. According to him, the US also eased sanctions enforcement as it sought a nuclear deal with Iran.
Going dark
According to Singh, sanctioned oil is typically transported on old ships that would otherwise be scrapped, resulting in cost savings. Cargoes may be shipped directly from the country of origin on tankers that have gone dark – that is, their transponders have been turned off or transferred between vessels at sea to conceal the origin of the crude, he said.
Iranian and Venezuelan crudes are frequently re-branded as oil from Oman and Malaysia. According to official data, China has not received any Iranian crude since December 2020, while imports from Oman and Malaysia have increased. According to Braemar and industry consultant Energy Aspects Ltd, Chinese imports of sanctioned crude should remain elevated around current levels early this year due to slow progress in the nuclear talks.
Global oil prices have risen nearly 50% in the last year, making cheaper, sanctioned barrels more appealing. Analyst at Energy Aspects in London, this could be exacerbated by tax and pollution probes into Chinese teapots, which are putting more pressure on them.
